Correlation Between Grupo México and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both Grupo México and Rio Tinto at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Grupo México and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grupo Mxico SAB and Rio Tinto Group, you can compare the effects of market volatilities on Grupo México and Rio Tinto and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Grupo México with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo México and Rio Tinto.
Diversification Opportunities for Grupo México and Rio Tinto
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Grupo and Rio is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Mxico SAB and Rio Tinto Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto Group and Grupo México is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Grupo Mxico SAB are associated (or correlated) with Rio Tinto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio Tinto Group has no effect on the direction of Grupo México i.e., Grupo México and Rio Tinto go up and down completely randomly.
Pair Corralation between Grupo México and Rio Tinto
Assuming the 90 days horizon Grupo Mxico SAB is expected to under-perform the Rio Tinto. But the pink sheet apears to be less risky and, when comparing its historical volatility, Grupo Mxico SAB is 1.18 times less risky than Rio Tinto. The pink sheet trades about -0.27 of its potential returns per unit of risk. The Rio Tinto Group is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 6,532 in Rio Tinto Group on August 30, 2024 and sell it today you would lose (252.00) from holding Rio Tinto Group or give up 3.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grupo Mxico SAB vs. Rio Tinto Group
Performance |
| Timeline |
| Grupo Mxico SAB |
| Rio Tinto Group |
Grupo México and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grupo México and Rio Tinto
The main advantage of trading using opposite Grupo México and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo México position performs unexpectedly, Rio Tinto can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Rio Tinto will offset losses from the drop in Rio Tinto's long position.| Grupo México vs. Pilbara Minerals Limited | Grupo México vs. South32 Limited | Grupo México vs. Critical Elements | Grupo México vs. TVI Pacific |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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